Report: Romney family pocketed at least $15.3 million from 2009 auto bailout

The long-running battle over pension cuts absorbed by thousand of employees from the Troy-based Delphi Corp. has come up in the presidential election campaign.

The Nation magazine recently reported that the Romney family pocketed at least $15.3 million from the 2009 auto bailout through an investment by one of its proxies, Elliott Management, in the bankrupt Delphi Corp. auto parts company.

The information was apparently gleaned from filing on a blind trust for Ann Romney, which invested $1 million with Elliott Management.

The Romney campaign said the Republican candidate had no role whatsoever in the investment or restructuring of Troy-based Delphi. "It was held in a blind trust which Gov. Romney had no control over," said Romney campaign spokesman Mike Levoff.

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In other filings with the SEC and other agencies Elliott Management has disclosed investment in Delphi was one of its principal holdings. Elliott Management is also controlled by Paul Singer, billionaire Wall Street Financier, who has been identified in the Wall Street Journal and elsewhere as a major donor to the Romney campaign.

Elliott Management was one of a small group of hedge funds that restructured and brought out of bankruptcy in 2009. As part of the restructuring the pensions of 20,000 Delphi salaried employees were transferred to the federal Pension Benefit Guarantee Corp. The PBGC reduced the pensions of many employees to the prevailing statutory amount, effectively reducing the income of many of the retirees.

The UAW and other groups are complaining that Mitt Romney's June 1, 2012, Public Financial Disclosure Report to the Office of Government Ethics did not reveal this windfall because he did not disclose the underlying holdings of his private equity and limited partnership funds.

A coalition of community, labor and good-government organizations, including the United Auto Workers, is calling on the U.S. Office of Government Ethics to investigate Romney for noncompliance with the Ethics in Government Act and compel him to either disclose his investments or divest them. The groups plan to hold a press conference in Toledo November 1 to publicize the charges.

"The American people have a right to know about Gov. Romney's potential conflicts of interest, such as the profits his family made from the auto rescue," said UAW President Bob King Wednesday.

"It's time for Gov. Romney to disclose or divest," King said.

The groups sending the complaint letter, including Service Employees International Union, Citizens for Responsibility and Ethics in Washington, Public Citizen, Public Campaign, People for the American Way and The Social Equity Group, believe Romney's undisclosed stock holdings create serious conflicts of interest. They point to the auto rescue as a key example.

In a recent interview in The New Yorker magazine, Romney blamed the downfall of General Motors and Chrysler on rich benefit packages and union contracts.

The attack on Romney basically revolves around one of the most contentious elements of the Obama administration's controversial auto bailout.

The cause of the Delphi workers has been picked up by several Republican congressmen, who have claimed the auto bailout was heavily tilted in favor of the UAW, which had backed Obama in 2008, while it left behind the non-union salaried employees.

The Delphi Salaried Retirees filed suit back in 2009 to block the transfer of the pension fund to the PBGC. But Delphi employees have never challenged the hedge funds, which controlled Delphi after its bankruptcy.

As part of company's restructuring, Delphi long-established manufacturing base in the United States was decommissioned and the jobs gradually shifted to plants in Mexico, China and other places in Asia, Europe and Latin America. Delphi, however, continues to maintain a large research and development presence in southeast Michigan.

King said Paul Ryan and Romney are the last people who should be championing the cause of Delphi salaried workers whose pensions were terminated during the General Motors and Delphi bankruptcies.

"Despite opposing the auto rescue, Romney personally profited off the deal that cut the pensions of workers at Delphi Automotive, an automotive parts division spun off from GM in 1999," said King, who cited the story from The Nation to support his assertion.

King said Elliott swooped in to buy -- for pennies on the dollar -- controlling interest in Delphi during its bankruptcy.

"The Romney campaign has not denied that the Romney family made at least $15 million and as much as $115 million off its investment in the hedge fund that controlled Delphi after its bankruptcy," King said. The exact size of Romney's capital gain from the transaction is unknown because he has never released tax returns for 2009 and 2010.

Elliott Management was part of a small group of hedge funds that leveraged more than $12 billion in rescue funds from the U.S. Treasury Department and GM, by threatening to withhold components critical to the assembly of GM cars. Steven Rattner, former counselor to the Treasury secretary in the Obama administration during the auto restructuring, likened it to "extortion demands by the Barbary pirates."

"It was Mitt Romney's major campaign contributor -- not the Obama administration -- who forced the termination of all of the Delphi pension plans for both union and salaried workers," King said.

"GM is paying the portion of the pension of UAW members that is not covered by the PBGC because it is honoring an agreement in place since 1999, when Delphi was spun off from GM. We have always supported the salaried Delphi workers receiving their full pensions, and it is unfortunate that Mitt Romney, after dumping their pensions, is further exploiting these workers for his personal gain. Delphi's major new owners made enough profit in just one year to have fully funded these salaried workers' pensions and still made $400 million," King added.

The group of which Elliott Management was part also managed to trump a bid by Los Angeles-based Platinum Equity, which is led by Tom Gores, a Michigan State University alumnus who grew up in Flint, Mi. and was offering capital to help his home state rebuild after the devastating recession.

After failing to gain control of Delphi, Gores went on to purchase the Detroit Pistons, which some observers thought might flee the Motor City for a more economically stable climate.

GM officials have said Delphi's salaried fully funded when Delphi was spun off by the automaker in 1999. But the fund was underfunded by 2009 and several former Delphi executives were facing SEC charges for manipulating the company legally-required financial reports.

Former Delphi CEO J.T. Battenberg was ultimately found guilty of civil infractions of SEC rules after a trial in US District Court in Detroit. As allowed by law, the PBCG claimed the assets of underfunding of the Delphi pension was never investigated by an outside agency.

Meanwhile, the UAW also has attacked Romney for Bain Capital's role in moving jobs from a plant in Freeport, Ill. to China, idling 170 workers.

King said Sensata has forced workers at the Freeport plant to train replacements from China and even reduced their severance packages. Workers and their supporters have been camping out across from the plant -- at "Bainport Encampment" -- to bring attention to their cause.